Magazine

That’s Right, We’re a Fiduciary

By Sallie Krawcheck

April 11, 2018

At Ellevest, our number one goal (24/7/365) is making investing a better experience for you. It’s that simple. This isn’t something we say because it sounds warm and fuzzy; we say it because we’re a fiduciary.

Sound familiar? You may have heard John Oliver talking about fiduciaries on Last Week Tonight. Being a fiduciary means that since we’re an SEC-registered investment advisor — granted, a cool, digital one — Ellevest is obligated to act in your best interests.

And it means that we’ve always chosen to be held to a higher standard.

Walking the Walk, Talking the Talk

Standards are a good thing to have. But the financial industry doesn’t follow the same standards when it comes to providing investment advice to clients. Investment advisors like Ellevest have a duty to put your needs first. No ifs, ands, or buts about it.

Our number one goal is making investing a better experience for you.

So what do these standards look like at Ellevest?

For starters, we’re big on transparency. We’ve created and implemented policies and procedures to help us be transparent while making sure we’re following the Advisers Act. (This law defines what an investment advisor is and outlines what investment advisors are supposed to do.)

You’ve already seen some of this in action. We’re upfront about how we manage your investment portfolios in relation to your goals. Our disclosures — which appear everywhere from our Magazine articles to account statements — make sure you’re getting the full and accurate picture of our services at all times. We don’t play around with security when it comes to your personal information. Oh, and we keep records like your grandmother keeps photo albums, so we can show that we’re constantly working to have your best interests in mind.

Also, safeguarding your assets is another one of our responsibilities. We work with broker-dealer Folio for this purpose: Folio buys and sells the investments (in our case, primarily exchange-traded funds, or ETFs) in your portfolios — after we give them the green light. Folio also keeps your money and investments secure with insurance for brokerage failure (if Folio goes under) through two organizations: the Securities Investor Protection Corporation (SIPC) and Lloyd's of London.

Speaking of your money, we’re also straightforward about what we do for you and what it costs.

How Much You’re Actually Paying

Hidden fees stink. Overly complicated fee structures stink, too. How are you supposed to trust your money to someone who isn’t transparent about how much it may end up costing you to use their services?

We’re upfront about the fees we charge at Ellevest: 0.25% of assets under management for Ellevest Digital, and .50% for Ellevest Premium, for all accounts except for Emergency Funds (we don’t charge anything for those). We also primarily invest in low-cost ETFs, so the management fees — charged by the fund behind the ETF — on your investments range from 0.04% to 0.65%.

Speaking of fees, here’s another way we do things differently from some other investment advisors, including some digital ones: We don’t earn commissions or rebates for recommending specific funds for your investment portfolio. Heck, we don’t even offer our own funds like certain broker-dealers may do. So you can be confident that when we recommend investments, we’re not doing it to pad our bottom line. We’re recommending them because we genuinely believe that specific combination of funds will give you the best shot at reaching your goals or better in 70% of market scenarios.

What You’re Paying For

We also believe that you should know exactly what services you’re getting for the fees you pay.

As an Ellevest client, you’re paying for investment advice specifically aimed at helping you to get you to your goal amount or greater in 70% of market scenarios (higher than some other digital advisors). This involves building your recommended personalized investment portfolios, determining how much risk you can afford for each of your goals, and selecting the right investments to help get you there.

You’re paying us to monitor your portfolios daily and rebalance if/when they get out of sorts to make sure you’re staying on track. (FYI: We’ll also let you know if you fall off track from reaching your goals so you can take the necessary steps to fix it.) We also reinvest your dividend payments for you. Risk management is part of the package, too; we make your portfolio more conservative as you near your goal date because we want to increase your chances of reaching that goal.

Here’s what you never pay for, by the way: your personalized investment plan. We give you a completely free financial plan immediately after you sign up and tell us some details about yourself and your existing accounts. That plan offers recommendations on how much money to target for your specified goals (retirement and non-retirement), how much you should deposit to your Ellevest accounts (should you decide to invest with us)...and we show you asset allocations for your Ellevest accounts and any non-Ellevest accounts you already have.

How We Act In Your Best Interests

Ok, let’s talk about how Ellevest puts you first. We start by getting personal. When you sign up with Ellevest, you tell us about yourself and your financial situation, choose the goals that fit your life, and share how you’d like to prioritize those goals. We use all of that information to create a personalized investment plan tailored to your specific wants.

It’s also why we give you forecasts that are built with models that aim to reflect observed market behavior; specifically we build more downturns into our forecasts than others do. No one likes downturns, but they happen. So, because we want to give you greater confidence while planning for your future, we use models that include downturns at rates close to what we’ve seen historically. Other models, which some advisors use, have downturns occurring less frequently. We believe that being more conservative — which our forecasts are — is in your best interests.

So there you have it: Ellevest has been a fiduciary since the beginning. We’re not interested in building the best investment portfolio for Ellevest; we’re building the best investment portfolio for you. And we’re constantly examining how we can do things better. Go big or go home, right?

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

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